The case against Fabrice Tourre â€" a former Goldman Sachs trader who is accused of misleading clients by selling a mortgage securities investment that, the government claims, was designed to fail â€" is likely to be the most prominent case for the Securities and Exchange Commission stemming from the financial crisis. But if the S.E.C. has its way, the jury may never hear the full account, Andrew Ross Sorkin writes in the DealBook column.
The case, set to begin Monday in a courtroom in downtown Manhattan, rests on whether Mr. Tourre deprived investors of information that the S.E.C. says they needed. The S.E.C. claims that Mr. Tourre deliberately hid the intentions of the billionaire John A. Paulson, who helped choose the assets in the mortgage security and also bet against it. “And so it is a little awkward, in a case that hinges on appropriate disclosure, that the S.E.C., in a bevy of pretrial briefs, appears to be fighting vociferously to exclude troves of evidence from the trial that the defense says is material for the jury to make an informed decision about Mr. Tourre’s innocence or guilt,†Mr. Sorkin writes. “The S.E.C., for example, has sought to block any mention of news reports that Mr. Paulson was betting against the subprime mortgage market.â€
“The S.E.C. has also tried to block references to public statements made by current and former regulators, including Ben S. Bernanke, Henry M. Paulson Jr. and Alan Greenspan, that suggested that the subprime lending problems were overblown,†Mr. Sorkin says. In addition, ACA Management, which the S.E.C. has portrayed as a victim of Mr. Tourre’s fraud, “was not considered a victim when the government divided the $550 million Goldman Sachs settlement that had been set up to repay victims. The government excluded ACA completely from the list of investors that were paid from the Goldman settlement. How can ACA be a victim for the purpose of Mr. Tourre’s case, but not be for the purpose of the recompense?â€
SCRUTINIZING SALES OF EARLY DATA Â |Â With the data provider Thomson Reuters moving to suspend an early release of a consumer confidence survey to clients who pay extra, the financial industry is bracing for new scrutiny of services that give trading firms an advance look at market-moving data and news, Nathaniel Popper reports in DealBook. Federal securities regulators have, for the most part, been comfortable with arrangements that give traders first access to data. But the New York attorney general, Eric T. Schneiderman, is potentially in a position to throw them into question, Mr. Popper writes.
The attorney general, armed with broad powers stemming from the Martin Act, has unnerved some on Wall Street. “Where are you going to go with this investigation?†said Chris Malo, the chief financial officer at the high-speed trading firm Sun Trading. “It’s a slippery slope. I don’t know where you draw the lines.†But the inquiry is being cheered by others. “This is a much welcome change,†said Eric Hunsader, the founder of the market data provider Nanex. “Somebody needed to take this up.â€
PERELMAN SUES MILKEN, AN OLD FRIEND  | The billionaire deal maker Ronald O. Perelman, no stranger to litigation, has begun a legal battle against a man who helped put him on the map: Michael R. Milken, DealBook’s Peter Lattman reports. “One of Mr. Perelman’s companies, Harland Clarke Holdings, filed a little-noticed lawsuit last month accusing Mr. Milken of fraud. The case stems from Harland Clarke’s 2011 purchase of GlobalScholar, an education technology company backed by Mr. Milken, the fallen financier and philanthropist.â€
“The lawsuit, filed in state court in San Antonio, was said to have surprised Mr. Milken, who had done business with Mr. Perelman for decades and counts him as a friend, according to a person briefed on the matter who is not authorized to discuss the lawsuit publicly. For Mr. Perelman, people close to him said, the lawsuit is nothing personal against Mr. Milken â€" just business.â€
ON THE AGENDA  | A House Financial Services subcommittee holds a hearing at 10 a.m. on how the Consumer Financial Protection Bureau collects and uses data. Another House Financial Services subcommittee has a hearing at 2 p.m. on “constitutional deficiencies and legal uncertainties†in the Dodd-Frank Act. Mario Gabelli is on CNBC at 12 p.m. Rich Riley, chief executive of Shazam Entertainment, is on Bloomberg TV at 1 p.m.
ON WALL STREET, DISMAY AT SPITZER’S RUN  | Strategy sessions were organized on Monday with the mission of stopping Eliot Spitzer, the former governor and attorney general who has decided to run for the citywide office of comptroller, Michael Barbaro and David W. Chen report in The New York Times. On Wall Street, where Mr. Spitzer once made powerful enemies, executives made little secret of their dismay. Robert T. Zito, the founder of a brand consulting firm and a former executive at the New York Stock Exchange, put it bluntly: “I would love to see his opponent win.â€
The Times writes: “Those involved in and briefed about the strategy discussions raised the possibility of organizing a super PAC to counter Mr. Spitzer’s self-financed campaign. Eyes turned to Mr. Spitzer’s most fervent critics on Wall Street, like the billionaire Kenneth G. Langone, a co-founder of Home Depot and a former director of the New York Stock Exchange, who had relished the governor’s downfall. According to a person told of his plans, Mr. Langone was mulling independent campaign expenditures against Mr. Spitzer.â€
LVMH Buying the Luxury Clothier Loro Piana  | LVMH Moët Hennessy Louis Vuitton, the French luxury goods giant, has agreed to pay about $2.6 billion for an 80 percent stake in Loro Piana. DealBook »
Chief of Barnes & Noble Resigns After Losses on E-Readers  | The departure of William Lynch Jr., the chief executive of Barnes & Noble, “was part of a series of sweeping changes the company announced as it tries to regain its footing after a failed initiative to build up its Nook division and compete in the increasingly crowded market for e-readers,†The New York Times writes. NEW YORK TIMES
Prospective Buyers Circle Hulu  | The parties reported to have submitted bids for Hulu included DirecTV and, in a joint bid, the Chernin Group and AT&T, according to Bloomberg News. Time Warner Cable was said to have bid for a stake in the company. Guggenheim Digital Media and K.K.R. have also teamed up on a bid, according to The Wall Street Journal. BLOOMBERG NEWS  | WALL STREET JOURNAL
Clearwire Shareholders Support Sprint Offer  |Â
REUTERS
Big Seal of Approval for Dell Founder’s Buyout Bid  | Institutional Shareholder Services recommended that Dell investors accept the $24.4 billion offer made by the company’s founder and chief executive, Michael S. Dell. Other such firms, including Glass Lewis & Company, made similar recommendations later in the day. DealBook »
Pondering a Drought in Merger Deals  | A report from Ernst & Young released on Monday proposes that the deal-making slump may be more than just a passing phase. DealBook »
Why a Cablevision Acquisition May Not Be Likely  | Investors betting on a takeover of Cablevision “may be turning a blind eye to major obstacles standing in the way,†The Wall Street Journal’s Heard on the Street column writes. WALL STREET JOURNAL
Spaniards Fight to Recover Savings  | Many thousands of Spaniards “have seen their life savings virtually wiped out in what critics call a deceptive and possibly fraudulent sales campaign by banks that were threatened by the implosion of Spain’s property market,†The New York Times reports. NEW YORK TIMES
Buffett Gives $2 Billion to Gates Foundation  | Warren E. Buffett distributed 17.5 million Class B shares of Berkshire Hathaway on Monday to the Bill and Melinda Gates Foundation, a gift valued at about $2 billion, based on Friday’s closing price. DealBook »
Tesla Motors to Replace Oracle in Nasdaq 100 Index  | The change comes after Oracle applied to leave Nasdaq for the New York Stock Exchange. PRESS RELEASE
Citigroup Adds Two New Directors  | Gary M. Reiner, former chief information officer for General Electric, and James S. Turley, former chairman and chief executive of the accounting firm Ernst & Young, will join an expanded board. DealBook »
TPG Capital Said to Bid for MacDon Industries  | The private equity firm TPG Capital is “one of the final bidders for MacDon Industries Ltd., a manufacturer of agricultural machinery looking to sell itself for around $1 billion, three people familiar with the matter said on Monday,†Reuters reports. REUTERS
Ackman Seeks $1 Billion for Bet on Unidentified Company  | William A. Ackman of Pershing Square Capital Management is asking for $1 billion to commit to two new funds that will bet on a single United States company that, Mr. Ackman said, he was not able to identify for all the investors, Reuters reports. REUTERS
A Punishing Period for Paulson’s Gold Fund  | Reuters reports: “Hedge fund manager John Paulson’s gold fund has lost 65 percent of its worth so far this year after the portfolio declined 23 percent last month, two people familiar with the fund said on Monday.†REUTERS
Hasbro Invests $112 Million in Game Maker  | Hasbro has paid $112 million in cash for a 70 percent stake in Backflip Studios, a Colorado company that makes games like Dragonvale and NinJump, TechCrunch reports. TECHCRUNCH
Layoffs at TaskRabbit Amid Restructuring  |Â
TECHCRUNCH
NYSE Euronext Said to Be Chosen to Run Libor  | NYSE Euronext won a contract to administer and improve the London interbank offered rate, a person briefed on the decision said on Tuesday. DealBook »
Pension Proposal Aims to Ease Burden on States and Cities  | A proposal by Senator Orrin Hatch, Republican of Utah, would enable governments to turn their pension plans over to life insurers. DealBook »
Madoff Case Puts Focus on Duties of Custodial Banks  | A lawsuit brought by investors who lost $60 million in Bernard L. Madoff’s huge Ponzi scheme claims that Westport National Bank failed to protect their money. DealBook »
In Detroit, Problems Are Bigger Than Just Debt  | “The city is past being a city now; it’s gone,†said Kendrick Benguche, whose family lives on a block with a single streetlight, near a vacant firehouse that sits beside a burned-out home, The New York Times reports. NEW YORK TIMES
Banks May Face 2 Ratios on Capital  | The Federal Deposit Insurance Corporation is set to vote on a plan that could “set leverage ratios of 5 percent and 6 percent, one for parent companies and another for their U.S.- backed lending units, said a person with knowledge of the plans,†Bloomberg News reports. BLOOMBERG NEWS
Calendar Is Not Biggest Hurdle in SAC Prosecution  | Prosecutors have only a few weeks before the statute of limitations expires on bringing securities fraud charges against Steven A. Cohen and SAC Capital Advisors, but there are ways to charge a violation based on the 2008 trading that would achieve nearly the same result, Peter J. Henning writes in the White Collar Watch column. White Collar Watch »
Britain Backs New Rules to Jail Bankers Over ‘Reckless Misconduct’  | The British government has backed a set of recommendations to improve standards in the banking industry, including measures that could have bankers in Britain facing jail time for poor business decisions. DealBook »
India to Provide Additional Capital to State-Run Banks  | India plans to inject as much as 140 billion rupees ($2.3 billion) in state-run banks by the end of September, Bloomberg News reports. BLOOMBERG NEWS
